Question 1

Assume you are working at a department store and you are told by the manager to cut prices by 20% for all the new women's sweaters that are currently priced at $50. What will be the new price of these sweaters? Suppose the manager tells you to raise the prices back up by 20%. What is the new price of the sweaters? Why is your answer not the same as the original price of the sweaters? What importance does this have for why the midpoint formula is used in calculating price elasticity?

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Question 2

What is the midpoint formula for calculating a percentage change?

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Question 3

Suppose that the price elasticity of demand for museum tickets is equal to -1.8. If the price of a museum ticket rises by 30 percent, what will happen to quantity demanded?

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Question 4

The price of cabbage rises from $0.20 per pound to $0.30 per pound. The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week. Use the midpoint formula to calculate the price elasticity of demand for cabbage. Is the demand elastic, inelastic, or unit elastic?

Accepted Answer

The answer of The price of cabbage rises from $0.20...

Question 5

Using the graph below explain why the elasticity of demand will be greater between $15 and $9 as opposed to between $9 and $4. Hint: You do not need to perform any calculations to prove that this is true.

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Question 6

Suppose that the quantity of staplers demanded falls from 10,000 per week to 8500. Use the midpoint formula to calculate the percentage change in quantity demanded.

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Question 7

Suppose that the price of a pound of potatoes increases from $0.75 to $0.90. Use the midpoint formula to calculate the percentage change in price.

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Question 8

The price of a new portable CD player falls from $100 to $90. The quantity of CD players demanded rises from 15,000 per year to 20,000 per year. Use the midpoint formula to calculate the price elasticity of demand for portable CD players. Is the demand elastic, inelastic, or unit elastic?

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Question 9

Even though airfares have been increasing, the revenue earned by airlines has declined. Based on this statement, what may be concluded about price, cross-price, or income elasticity of demand?

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Question 10

Refer to the information provided in Scenario 5 below to answer the following questions.
SCENARIO 5: In 1999 Disk Monger sold 1,100 digital video disks (DVD) at a price of $15 each. Across the street, Audio Haven sold 700 DVD players at a price of $500 each. In 2000, Audio Haven reduced the price of DVD players to $250 each and sold 3,000 players. In the same year, Disk Monger sold 1,300 DVDs at a constant price of $15 each.
-Refer to Scenario 5. Calculate the price elasticity of demand for DVD players. Is demand for players elastic, inelastic, or unitary?

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Question 11

What is the likely price elasticity of demand for crabs? Why?

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Question 12

Suppose a movie theater raises its ticket prices by 10% and the total revenue it receives in ticket sales doesn't change one bit from the previous week. What can you say about the price elasticity of demand at that new price? Could this go on indefinitely? In other words, would continued price increases leave total revenue unchanged without bound? Why or why not?

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Question 13

Refer to the information provided in Scenario 1 below to answer the following questions.
SCENARIO 1: The following diagram represents the U.S. market for oil. 
-Refer to Scenario 1. Use the midpoint formula to calculate the price elasticity of demand between $18 and $16.

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Question 14

Refer to the information provided in Scenario 5 below to answer the following questions.
SCENARIO 5: In 1999 Disk Monger sold 1,100 digital video disks (DVD) at a price of $15 each. Across the street, Audio Haven sold 700 DVD players at a price of $500 each. In 2000, Audio Haven reduced the price of DVD players to $250 each and sold 3,000 players. In the same year, Disk Monger sold 1,300 DVDs at a constant price of $15 each.
-Refer to Scenario 5. What will be the effect on total revenue for Audio Haven if it raises the price for DVD players?

Accepted Answer

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Question 15

The price of pizza falls by 25 percent. If the elasticity of demand for pizza is equal to -1.5, what will happen to the quantity of pizza demanded?

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Question 16

Customers often complain about the high price of accessories for their cell phone including batteries, chargers and head sets. Often these items can cost even more than the price of the phone. Explain using price elasticity why this might be the case.

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Question 17

What is the "midpoint formula" and why is it used?

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Question 18

Refer to Scenario 2. Over a long period of time, in the absence of any restrictions in the market, would you expect the price elasticity of demand for crabs to be more elastic or inelastic? Explain.

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Question 19

Suppose that the price elasticity of demand for snow shovels is -1.2. What would have to happen to the price of a snow shovel for the quantity demanded to fall from 2,000 to 1,800? Use the midpoint formula in your calculations.

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Question 20

The university you attend needs to increase total revenue. The president suggests that by raising tuition by 5%, total revenue will increase. However, after the tuition increase, total revenue actually fell. What can you infer about the price elasticity of demand for an education at your university? Why is this likely to be true? What did your university president assume to be true about the price elasticity of demand for an education at your university?

Accepted Answer

The answer of The university you attend needs to increase...

Quiz 5: Elasticity

What is the midpoint formula for calculating a percentage change?

Suppose that the price elasticity of demand for museum tickets is equal to -1.8. If the price of a museum ticket rises by 30 percent, what will happen to quantity demanded?

The price of cabbage rises from $0.20 per pound to $0.30 per pound. The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week. Use the midpoint formula to calculate the price elasticity of demand for cabbage. Is the demand elastic, inelastic, or unit elastic?

Using the graph below explain why the elasticity of demand will be greater between $15 and $9 as opposed to between $9 and $4. Hint: You do not need to perform any calculations to prove that this is true.

Suppose that the quantity of staplers demanded falls from 10,000 per week to 8500. Use the midpoint formula to calculate the percentage change in quantity demanded.

Suppose that the price of a pound of potatoes increases from $0.75 to $0.90. Use the midpoint formula to calculate the percentage change in price.

The price of a new portable CD player falls from $100 to $90. The quantity of CD players demanded rises from 15,000 per year to 20,000 per year. Use the midpoint formula to calculate the price elasticity of demand for portable CD players. Is the demand elastic, inelastic, or unit elastic?

Even though airfares have been increasing, the revenue earned by airlines has declined. Based on this statement, what may be concluded about price, cross-price, or income elasticity of demand?

What is the likely price elasticity of demand for crabs? Why?

Refer to the information provided in Scenario 1 below to answer the following questions. SCENARIO 1: The following diagram represents the U.S. market for oil. -Refer to Scenario 1. Use the midpoint formula to calculate the price elasticity of demand between $18 and $16.

The price of pizza falls by 25 percent. If the elasticity of demand for pizza is equal to -1.5, what will happen to the quantity of pizza demanded?

Customers often complain about the high price of accessories for their cell phone including batteries, chargers and head sets. Often these items can cost even more than the price of the phone. Explain using price elasticity why this might be the case.

What is the "midpoint formula" and why is it used?

Refer to Scenario 2. Over a long period of time, in the absence of any restrictions in the market, would you expect the price elasticity of demand for crabs to be more elastic or inelastic? Explain.

Suppose that the price elasticity of demand for snow shovels is -1.2. What would have to happen to the price of a snow shovel for the quantity demanded to fall from 2,000 to 1,800? Use the midpoint formula in your calculations.